Can You Agree To An EULA You Never Saw?

from the probably-not dept

Slashdot points us to an interesting article about a guy involved in a legal fight with computer maker Gateway over whether or not he agreed to an arbitration clause in an end user license agreement (EULA) for his new computer. In this case, the guy claims his computer never worked properly, so he couldn't even see the on-screen license agreement that apparently included an arbitration clause, saying that he would agree to arbitrate any dispute, rather than take it to court. He then sued Gateway over problems with the machine. The case here doesn't have anything to do with whether or not that lawsuit has merit, but whether or not it could even go to court at all. Gateway contends that the guy shouldn't be able to take them to court because of the arbitration clause. But, of course, the guy claims he couldn't read the license agreement, so he certainly never agreed to it. The court found that the guy made a compelling enough case that he had not seen the license agreement, and therefore can not be forced to go to arbitration (even as some experts suggest that he actually would be better off going to arbitration, rather than through the courts). However, it also raises the question (not answered here) over what does constitute an official agreement. I've been told by lawyers that such arbitration clauses aren't even enforceable in California, but either way, with plenty of evidence that most people never read the EULAs they agree to, could they argue that the clauses don't apply as well?

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  1. identicon
    Intrepid, 9 Jun 2007 @ 9:14pm

    US Court of Appeals 7th Cir - Summary of Decision

    For full decision, see:

    In the
    United States Court of Appeals
    For the Seventh Circuit

    No. 96-3294

    RICH HILL and ENZA HILL, on behalf
    of a class of persons similarly situated,



    GATEWAY 2000, INC., and DAVID PRAIS,


    Appeal from the United States District Court
    for the Northern District of Illinois, Eastern Division.
    No. 96 C 4086--Suzanne B. Conlon, Judge.


    EASTERBROOK, Circuit Judges.

    -->> A customer picks up the phone, orders a computer, and gives a credit card number. Presently a box arrives, containing the computer and a list of terms, said to govern unless the customer returns the computer within 30 days. Are these terms effective as the parties' contract, or is the contract term- free because the order-taker did not read any terms over the phone and elicit the customer's assent?

    One of the terms in the box containing a Gateway 2000 system was an arbitration clause. Rich and Enza Hill, the customers, kept the computer more than 30 days before complaining about its components and performance. They filed suit in federal court arguing, among other things, that the product's shortcomings make Gateway a racketeer (mail and wire fraud are said to be the predicate offenses), leading to treble damages under RICO for the Hills and a class of all other purchasers. Gateway asked the district court to enforce the arbitration clause; the judge refused, writing that "[t]he present record is insufficient to support a finding of a valid arbitration agreement between the parties or that the plaintiffs were given adequate notice of the arbitration clause." Gateway took an immediate appeal, as is its right. 9 U.S.C. § 16(a)(1)(A).

    The Hills say that the arbitration clause did not stand out: they concede noticing the statement of terms but deny reading it closely enough to discover the agreement to arbitrate, and they ask us to conclude that they therefore may go to court. Yet an agreement to arbitrate must be enforced "save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. Doctor's Associates, Inc. v. Casarotto, 517 U.S. 681 (1996), holds that this provision of the Federal Arbitration Act is inconsistent with any requirement that an arbitration clause be prominent. A contract need not be read to be effective; people who accept take the risk that the unread terms may in retrospect prove unwelcome. . . . Terms inside Gateway's box stand or fall together. If they constitute the parties' contract because the Hills had an opportunity to return the computer after reading them, then all must be enforced.

    * * *

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